Market Update: “Logic Has Been Replaced by Fear, By Panic”

Diversification during times of uncertainty and instability means different things to different people. For most of us looking to keep our eggs in different baskets, hard asset are a primary investment vehicle. As more dollars are printed by our central bank and more debt is borrowed to cover our government’s expenditures, there’s one thing we can be sure off: prices for essential resources are going up.

As our paper currencies lose value against the things that really matter, and the political situation takes a turn for the worse through more domestic taxation and regulation, it becomes difficult to discern where we can ‘park’ our money to keep it safe.

For many preparedness-minded individuals the survival instinct kicks in and the first thing we do is stock up on the essentials which will either disappear at the first signs of emergency or rise in value as crisis grips the world. That means things like food, precious metals, firearms, farmland and other important supplies and resources that will matter when the system as we know it comes unhinged. This is a prudent strategy to be sure, and those who invested in such assets before the 2008 financial crisis have seen positive investment gains employing it – not to mention the security of knowing you have a backup should things spiral out of control.

And, while it’s prudent to plan for the worst and have direct access to physical assets and commodities, an equally important consideration is how to properly diversify the funds we hold in our money market accounts, cash savings, 401k’s or IRA retirement accounts. Millions of Americans have their life savings in these types of accounts, and most of them are depending on a stable and fair ‘free market’ to keep that money safe.

But, as Casey Research[2] Chief Strategist Marin Katusa notes, we’re not exactly operating in a free market, or a stable environment, for that matter:

That is exactly the market we are in right now, where people are scared. Where people are selling on emotion. Where the logic has been replaced by fear, by panic.

Emotion is leading the market, and that’s where the level-headed logical buyer is going to make a fortune in the years coming by basing their investments on a fundamental 8 P’s principle – on people.

For those looking to expand their portfolios and diversify their assets in ways your financial adviser doesn’t even have a clue exist, listen to the complete interview fromFuture Money Trends[3] and Marin Katusa, who discusses strategies for investing in physical precious metals, international precious metals exploration and mining[3], energy resources and other non-traditional investment vehicles.

When we talk about worst-case-scenario diversification, we need to look at investment opportunities in a different light, often counter to traditional expert analysis. Long known for their ability to foresee crisis situations, Doug Casey and his team, which includes Marin Katusa who manages the firm’s KCR Fund, have been guiding investors for decades and were well ahead of the curve during the first stage of the global collapse we experienced over the last decade. They, like many of those who understand what’s coming our way, have been investing heavily into resources like physical commodities, precious metals, technology and land, much of it internationally to escape the draconian intervention of the U.S. government.

In the coming years we will see strife and financial destruction unlike anything in history. But during times of panic and fear, certain assets will always come out ahead.

I really believe by the end of 2013 we will see [gold] touch and cross $2000 [per ounce]. It may come back, and then settle back again.

You’ll see this is a huge psychological barrier.

And I think that the mainstream media, that the mainstream retail investors, until it breaks that $2000 it won’t attract that mass media attention. But I think 2013 is a critical year.

Look what’s going on with the fiscal cliff. Look what’s going on in Europe. Look at Asia, India, all these places.

And, gold is the real currency.

As Doug Casey recently noted[4], “we are living in the middle of the biggest bubble in history.”

This means we need to be looking at ways to shield ourselves[5] and our assets from a complete collapse of the system as we have come to know it.